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Amended Tax Return CPA explains the process | 1040X, 941X, 1120-S, 1065X, W2c

amended tax return CPA

Tthere are many reasons to amend tax returns. (910) 399-2705.

Amended tax return CPAs stayed busing during the Recession. The IRS confirms the number of amended tax returns is on the rise, but doesn’t say why. So I thought maybe some specific examples of issues that warranted me, as a CPA, to amend returns might be helpful.

Here’s sort of an overview of the process before you tackle 1040-X, 941-X, 1065-X, W-2c etc. If you get uncomfortable preparing it/them consider calling us for a free phone consult. We practice everywhere except HI, and our virtual office makes it easy to deal with us regardless of your location. Some points to remember:

  • You have three years to amend a return. You lose refunds after that.
  • The amended tax return requires an explanation.
  • Usually there is a separate return required to amend your taxes, like 1040-X or 1065-X. Except for Form 1120-S where you just check the “amended” box.
  • Amended tax returns usually need more documentation.
  • Amended tax returns should be cost efficient, or, correct an error before the IRS asks about it.
  • Amended tax returns often involve communicating with shareholders, partners, and employees. For example, Form 941-x often involves talking to employees about the error and working out a re-payment plan – ouch! Subchapter S Corporations and Partnership usually have to amend Schedule K-1 forcing Shareholders and Partners to amend their personal taxes by filing Form 1040-X.
  • The IRS tells your state about amended tax return, so factor that into the amendment strategy.

Case 1: CPA amended tax return to include 2011 Adoption Credit | Form 1040-X

A single Mother finalized an adoption in 2011, after her CPA filed her 2011 Form 1040. But then that CPA balked at amending the 2011 return to include the Adoption Credit (Form 8839), perhaps because the client had claimed the Earned Income Credit on her original 2011 tax return. The adoption credit was refundable in 2011, meaning the Mother could get an IRS check for adoption expenses even though she owed no tax in 2011. In 2012, the Adoption Credit is non-refundable; meaning this single Mom probably wouldn’t get much tax benefit for her 2011 Adoption expenses. The IRS regs clearly state the taxpayer can claim adoption expenses in the year the adoption was finalized. So filing an amended return, Form 1040-X, with a well documented Form 8839 for the Adoption Credit, results in $8000+ of additional refund.

“Amended tax returns can be tricky, be sure not to open other tax issues, or other tax years, with the IRS.”
– Gary Bode, amended tax return CPA

Case 2: CPA amended tax return to exclude Cancelled Debt | Form 1040-X, Form 1099-C, Form 982 and Schedule E

Here, the taxpayer received a blast from the past when an IRS notice arrived asking for $3500+ of additional income taxes for a car that was re-possessed two years ago. The bank wrote off the car loan. The car loan then became taxable income to my Client on that year’s Form 1040. He should have received a Form 1099-C, but he didn’t, maybe because he moved. Well, in this case, the re-possession of the car stemmed from a nasty girl friend breakup which left my Client financially devastated. It turned out that the client was partly insolvent at the time of the car’s repossession, at least by IRS standards. Which meant I could exclude most of that cancelled debt from the car through Form 982 when we filed his amended tax return, 1040-X. As it turned out, he also put his Condo up for rent the following year, which meant he had legitimate rental expense for the year of the car repossession he never declared. So when I, or any CPA, filed his amended Form 1040-X, it included Form 982, reducing his taxes on the original IRS demand, and Schedule E, which showed a loss to offset the remaining tax due. He actually got a refund instead of paying the demanded $3500+.

“It pays to pull your IRS records before amending a tax return. IRS Notices sometimes doesn’t catch every issue at once. You don’t want to amend an amended tax return”
– Gary Bode amended tax return CPA

Case 3: Payroll tax errors amended on 941-X and W-2c

Every payroll CPA has a favorite Form 941-X tax story. Let’s just assume a new business hired employees and paid them as subcontractors. Later, in the same year, they began paying them as employees. Since those Social Security numbers received a Form 1099 for work as a subcontractor, and a W-2 for work as an employee, the IRS asked why. So they had to amend their payroll tax forms, Form 941, with 941-X. Plus, we corrected the associated W-2c(s), negated the original Form 1099-MISC, and sent in a corrected F0rm 940.

“Amended tax returns require an explanation for the changes presented. Construct this explanation carefully. Be concise.”
– Gary Bode, amended tax return CPA

Case 4: Form 1065-X, amending a Partnership tax return

A new client was swindled by his Partner who cooked the books in his favor. So we re-constructed that tax year and amended the tax return by Filing Form 1065-X.

I’m an amended tax return CPA with a virtual office to serve you wherever you live. We practice in every State except HI. Of course we amend State taxes as well. For a free consult, please call (910) 399-2705.

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